Rector Square auction -- no bidders!

Anglo Irish Bank, the property’s largest lender, takes it back with a bid of $82.7 million; aborted condo conversion had mortgage of $165 million.

By Amanda Fung

Beleaguered developer Yair Levy’s failed Battery Park City condo conversion, Rector Square, was auctioned off in a bulk sale at a deep discount Wednesday afternoon at the New York Supreme Court in lower Manhattan.

The project’s largest lender Anglo Irish Bank, which foreclosed on the 304-unit Rector Square earlier this year bought the property back with an opening—and sole—bid of a mere $82.7 million. The bank was owed roughly $135 million on the project. In September, the bank determined that its best bet would be to sell the property as a single parcel.

While Related Cos. was seen as likely to put in an offer on the residential tower’s 232 unsold units, parking garage and commercial space, Related felt that the opening bid was too high, sources said. There were no other bidders.

Chris Sullivan of the law firm of Herrick Feinstein, which represents Anglo Irish, could not be reached immediately for comment. A Related spokeswoman declined to comment.

Last year, Mr. Levy's development firm, YL Real Estate Developers, defaulted on its $165 million mortgage on Rector Square. In its defense, YL Real Estate claimed that Anglo Irish did not comply with its loan obligations, which stalled the condo-conversion project.

Related was appointed by Rector Square's receiver, Michael Miller, to manage the property. The new owner of the building could choose to continue the conversion or maintain it as a rental property.

The troubled developer and his firm, found to have defrauded buyers and tenants at Rector Square, must also pay the development $7.4 million in damages and restitution.

By Amanda Fung

Troubled developer Yair Levy was banned from New York real estate this week.
Published: June 29, 2011 - 3:35 pm

The state Attorney General Eric Schneiderman office announced Wednesday that beleaguered developer Yair Levy has been permanently banned from doing business in New York.

The Supreme Court of New York ruled that Mr. Levy and his firm are barred from “engaging in any business activity relating to the advertisement, offer or sale of securities--which includes condominium and co-operative apartments--in or from the state of New York,” effective immediately.

The court also found that Mr. Levy defrauded buyers and tenants at Rector Square, Mr. Levy's failed Battery Park City condo conversion, by emptying the condominium's reserve fund. Under the judgment, Mr. Levy is ordered to pay Rector Square a sum of $7.4 million in damages or restitution, as well as $360,000 in civil penalties for illegal and fraudulent practices.

"The state of New York has no tolerance for the kind of fraud perpetrated by Yair Levy," said Mr. Schneiderman, in a statement. "With today's judgment, Yair Levy is out of business, and tenants and homebuyers in New York are more secure without this predator in the marketplace."

Mr. Levy said he plans on appealing the decision and did not elaborate. The attorney general's office said it has been a long time since a developer has been permanently banned from doing business in the state, other cases were temporary.

"The unit owners have previously faced extraordinarily difficult and unprecedented living conditions and financial challenges in a condominium conversion that was supposed to be their dream home,” said Marc Held of the law firm of Lazarowitz & Manganillo, which is representing Rector Square condo owners who sued the developer and other parties involved in the botched condo conversion project for $100 million. The judgment also rules in favor of the condo owners.

“The office of the attorney general has now taken extraordinary action against Yair Levy, by banning the sponsor from ever selling real estate again,” Mr. Held said. "It is the hope and expectation that Mr. Levy will improve the finances of the condominium by making restitution to the unit owners for what was done to them."

In 2009, Mr. Levy's development firm, YL Real Estate Developers, defaulted on its $165 million mortgage on Rector Square. In its defense, YL Real Estate claimed that Anglo Irish, its lender, did not comply with its loan obligations, which stalled the condo-conversion project. In November, Anglo Irish, which was owned roughly $135 million, foreclosed on the 304-unit property located at 225 Rector St.

In January, The Related Cos. took over the residential tower's 232 unsold units, parking garage and commercial space from Anglo Irish Bank for $82.8 million, the same price the bank paid to take back the property at a foreclosure auction in November.

Court documents show that Related, which took over the buildings' unsold units earlier this year, has agreed to work with the condo owners to build a more stable reserve fund and allow Rector Square to operate under its own board, relieving the project of its court-appointed receiver.